A recent New York Times article justifiably questions the future of cap and trade in light of a recent ruling putting implementation of California’s climate change law on hold. The basic argument against cap and trade in the case is one of environmental justice: if regulators focus too intently on GHG emissions, they may allow harmful concentrations of other pollutants to build up around areas in which a high concentration of allowances are held. I saw Brent Newell, attorney for the plaintiff Center on Race, Poverty & the Environment, make this argument at a recent conference. While the possibility appears very real, the appropriate solution, in my view, would be to demand strict enforcement of non-GHG air pollution control laws. But the larger point that emerges, as the Times article notes well, is that cap and trade may be falling apart as a politically viable approach in the U.S. generally. New Jersey has recently pulled out of RGGI (reported here), California’s law is being attacked from the left, and the right appears to almost uniformly disdain the tool that was once a relatively conservative, market-friendly approach to regulation added to the Clean Air Act under President George H.W. Bush (i.e., the cap and trade approach of the Acid Rain program). It’s hard to imagine a pure GHG tax taking hold in most of the U.S., so what is the most politically viable alternative? Command-and-control regulation?
Despite the dismal short-term prospects of any federal legislation to address climate change, sooner or later the U.S., or perhaps coalitions of the states and cities within it, will have to act. Not long ago, it seemed clear that cap and trade would be the vehicle for doing so. Now, perhaps not. And if the U.S. cannot embrace cap and trade — after so strongly backing it in the 1990s — what will future international deals on climate change look like?